The requirements for the earned income credit are as follows below. Your kids will count for the earned income credit as long as they meet the requirements for to be claimed as a qualifying child dependent (they are under the age of 19, or they are between 19 and 24 and college students) that lives with you for more than half of the year.
Eligibility for EITC
To qualify for EITC, workers must have earned income and adjusted gross income within certain limits; and meet certain basic rules. After meeting the basic rules, the worker must meet additional rules for those without a qualifying child or have a child that meets all the qualifying child rules for the worker or the worker’s spouse, if filing a joint return.
Also, there are
special rules
for those in the military, those with certain types of disability income and members of the clergy.
The IRS recommends using the EITC Assistant to help workers navigate through the following rules.
Rules for every worker
Must have earned income, such as payment from a job, tips or the income from running a business or farm. Most other types of income, such as retirement pensions and unemployment benefits, do not count as earned income.
Must have a Social Security number that is valid for employment for self, spouse and any qualifying children.
Must have zero or a small amount of investment income, such as interest from a bank account. The amount of investment income must be $3,350 or less.
Must have a filing status of single, head of household, married filing jointly or qualifying widow or widower. A taxpayer who files as married filing separately cannot get the credit.
Generally, must be either a U.S. citizen or resident alien.
Cannot be a qualifying child of another person.
Cannot file Form 2555 or Form 2555-EZ. These forms are used to claim the foreign earned income exclusion.
Must have earned income of at least $1 and earned income and adjusted gross income must each be less than the amounts in the following chart.
Filing Status
Single, Widowed or Head of Household
$14,590 - With zero qualifying children
$38,511 - With one qualifying child
$43,756 - With two qualifying children
$46,997- With three or more qualifying children
Married Filing Jointly
$20,020 - With zero qualifying children
$43,941 - With one qualifying child
$49,186 - With two qualifying children
$52,247- With three or more qualifying children
Who is a Qualifying Child
People who claim the credit, based on having one or more qualifying children, must meet the relationship, age, residency and joint return tests for each child.
Relationship test. The child must be the taxpayer’s:
son or daughter, including an adopted child or child placed for adoption.
stepchild.
foster child placed by an authorized placement agency or court.
brother, sister, stepbrother, stepsister, half brother, half sister or
descendant, such as grandchild, niece or nephew.
Age test. At the end of 2014, the child was:
Residency test. The child lived with the worker (or the worker’s spouse if filing a joint return) in the U.S. for more than half of 2014.
Joint Return test. A qualifying child who files a joint return can only do so to claim a refund with neither the child nor child’s spouse being required to file.
Only one person can claim the same qualifying child. If a child meets the rules to be a qualifying child of more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and another person, the other person can only get the credit if he or she has a higher Adjusted Gross Income (AGI) than the parent.
Workers without a qualifying child must meet three additional tests
To qualify for the EITC without a qualifying child, a worker:
Must have lived in the U.S. for more than half of 2014.
Must be at least age 25, but under age 65 at the end of 2014.
Cannot qualify as the dependent of another person.
Special Rule for Combat Pay. Combat pay received by members of the military serving in Afghanistan, Iraq and other combat zone localities is usually exempt from tax. But under a special rule, the member of the military can choose to count all of the combat pay as taxable income. Many times claiming the combat pay as taxable income increases the amount of the EITC. It’s their choice. IRS recommends using the EITC Assistant to figure out which way results in a larger credit and/or less tax owed.
